Sector & Group Rotation Notes – 4/21/13

Listed below are notes from the author's weekly analysis.

The Sector Trends blog does not make forecasts and does not cheerlead with its commentary. The perspective offered is on current trends in the market, which sectors and groups are rotating, and which stocks from these groups are likely to perform best in a neutral/positive environment. Readers need to provide their own assessment of market health, employ their own risk management strategies, and trade accordingly. In a declining market nearly all equities will suffer, including those found listed here. 

All data and charts displayed here are the property of MarketSmith, and are published here with their permission.

Market Overview:

The table below shows price performance for key markets and sectors over the trailing 26 weeks, and is sorted high to low by 5 week performance. The green and red shading denotes relative performance +/- to the SP 500 for the time period in question.

Index	1 Week Gain	2 Week Gain	3 Week Gain	5 Week Gain	13 Week Gain	26 Week Gain
Philadelphia Utility Index	1.0%	2.9%	4.2%	6.6%	14.2%	8.7%
DJIA	-2.1%	-0.1%	-0.2%	0.2%	6.6%	9.0%
SP 500	-2.1%	0.1%	-0.9%	-0.3%	4.7%	8.5%
Nasdaq Composite	-2.7%	0.1%	-1.9%	-1.3%	2.3%	6.7%
Dow Jones Transportation Index	-1.8%	-0.1%	-3.5%	-3.8%	6.0%	18.7%
Philadelphia Semiconductor Index	-3.8%	-0.5%	-4.5%	-4.0%	1.5%	14.3%
Russell 2000	-3.2%	-1.2%	-4.1%	-4.2%	2.2%	11.1%
KBW Large Cap Bank Index	-2.4%	-0.5%	-2.5%	-4.6%	2.6%	8.7%
Pboe Oil Service Index	-5.3%	-0.9%	-3.8%	-5.4%	-1.6%	2.9%
Russell 1000 Energy Index	-4.1%	-3.2%	-5.6%	-5.9%	-1.8%	0.1%
Philadelphia Housing Index	-4.9%	-2.7%	-6.4%	-6.2%	-3.8%	7.6%
Cboe Technology Index	-6.0%	-5.1%	-8.0%	-7.8%	-6.8%	-7.0%
Philadelphia Gold/Silver Index	-11.6%	-18.4%	-24.2%	-23.5%	-36.2%	-44.6%

Last week’s market overview noted that “Despite the new highs and solid gains the market is still showing signs of weakness… This narrowing of the market, with its evident preference for income over growth, is not a signature of a strong & healthy market.” The markets proved those words accurate last week as the S&P 500 fell 2.1%, the Russell 2000 3.2%, and other narrower indices fell from 4-12%. The only potential bright spot was the relative strength in transports where the 1.8% decline looked modest compared to other sectors.

Despite the poor market environment positive earnings helped some stocks move higher for the week. Overstock.com gained 56.1%, Media General +21.9%, Travelzoo +13.6%, Taiwan Semiconductor +9.7%, Chipotle +7.9%. Verizon +5.3%, Under Armour +3.7%, and Google +2.2%.

Earning losers included Joes Jeans -23.2%, Ultratech -20.9%, Freeport McMoran -16%, IXIA -12.9%, IBM – 10.2% and numerous others. Of the 289 companies reporting last week, 188 showed a loss for the week vs. 99 positive and 2 flat.

943 companies report next week including Apple which is scheduled to release Tuesday AMC. Other companies reporting include Boeing, Coach, Skechers, Ford, D R Horton, Pulte, Robert Half, Eastman Chemical, Qualcomm, EMC, Whirlpool, Exxon, Halliburton, Altria, Amazon, Las Vegas Sands, Netflix, Caterpillar, Celgene, Tractor Supply, Lumber Liquidators and numerous others.

Weakness in copper suggests deteriorating economic conditions.

 

Group Themes:

The tables below show commodity, technology and defensively related group's price performance over the trailing 1, 2, 3, 5, 13 and 26 week periods.

30 Commodity Oriented Groups:	1 wk	2 wk	3 wk	5 wk	13 wk	26 wk
# in the top 50 groups (out of 197)	4	3	1	2	3	5
# in the bottom 50 groups (out of 197)	13	15	16	17	16	13

28 Technology Oriented Groups:	1 wk	2 wk	3 wk	5 wk	13 wk	26 wk
# in the top 50 groups (out of 197)	2	3	2	1	2	2
# in the bottom 50 groups (out of 197)	15	14	15	15	11	11

30 Defensively Oriented Groups:	1 wk	2 wk	3 wk	5 wk	13 wk	26 wk
# in the top 50 groups (out of 197)	18	18	17	19	16	13
# in the bottom 50 groups (out of 197)	1	2	2	0	0	3

Commodity and tech oriented groups have fallen hard while defensively oriented groups have outperformed. This type of group performance bodes poorly for the market in the short term.

Industry Group Performance:

Apparel: Both apparel related groups performed well considering the circumstances. The Apparel-Shoes & Rel Mfg group (G3141) finished the week -1.4% while the Apparel-Clothing Mfg group (G2300) gave back 2.3%, finishing #54 and #85 respectively on the trailing 1 week price performance list. It’s possible these groups could continue to perform well if & when the market turns.

Builders: The Philadelphia Housing Index fell -4.9% last week and most housing related groups fell with it. 5 of 9 groups in the sector finished in the bottom 50 of the trailing 1 week price performance list with losses ranging from -4.4% to -6.8%.

Oddly, one group bucked the trend. The Chemicals-Paints group (G2851) gained 3.6% for the week, finishing #1 on the trailing 1 week price performance list. Sherwin Williams (SHW) announced earnings results Thursday morning which were apparently well received, and the other 3 stocks in the group (PPG, RPM, VAL)  moved in sympathy with it.

Food & Beverage: Defensively oriented Food and Beverage groups were strong performers last week with all 7 groups from the sector finishing in the top 50 of the 1 week price performance list. 6 of 7 rank in the top 50 of the 5 week list, and 5 of 7 are in the top 50 of the 13 week list.

Medical: The Medical-Biomed/Biotech group (G8063) gained 1.1% last week and has relative strength hitting a new high. The group gained 3.5% on Friday in volume 18% above average. Also performing well last week was the Medical-Ethical Drugs group (G2830) and the Medical-Generic Drugs group (G8064) with each group pulling back a modest -0.5%. Both groups rank in the top 50 of the trailing 1, 2, 3 and 5 week price performance lists.